In a pivotal announcement, CBN Governor Yemi Cardoso revealed a strategic shift in the Central Bank’s approach to the Nigerian economy. The emphasis will now be on core monetary policies, departing from the erstwhile quasi-fiscal interventions.
This transformative decision unfolded during Cardoso’s keynote address at the 58th Annual Dinner of the Chartered Institute of Bankers of Nigeria.
Cardoso highlighted the pitfalls of the CBN’s past, attributing failures to forays into “development finance activities,” specifically citing direct injections of over N10 trillion into the economy.
Identifying challenges during the tenure of his predecessor, Godwin Emefiele, Cardoso acknowledged issues like corporate governance lapses, reduced institutional autonomy, and an unorthodox foreign exchange market.
Addressing these concerns, Cardoso pledged a renewed focus on the bank’s primary mandate: contributing to Nigeria’s macroeconomic stability.
“I am aware that events over the past few years have put the CBN in a bad light. These issues can be attributed to various factors such as corporate governance failures, diminished institutional autonomy of the Central Bank of Nigeria, a deviation from the core mandate of the bank, unorthodox use of monetary tools, and an inefficient and opaque foreign exchange market that hindered clear access,” Cardoso stated.
He further explained, “Hitherto, the CBN had strayed from its core mandate and was engaged in quasi-fiscal activities that pumped over N10 trillion into the economy through different initiatives in sectors ranging from agriculture, power, and many others.”
To rectify these deviations, Cardoso outlined a comprehensive plan. “Under my leadership, the Central Bank of Nigeria will vigorously address these issues. We will tackle institutional deficiencies, restore corporate governance, strengthen regulations, and implement prudent policies.”
He clarified, “In line with our strategy to refocus on our core mandate, the CBN will discontinue direct quasi-fiscal interventionist activities and instead utilize orthodox monetary policy tools for implementing monetary policy.”
Understanding the shift requires insight into quasi-fiscal activities, which involve government-related institutions undertaking actions with fiscal implications. These actions, while impacting public finances, fall outside the regular government budgetary process.
During Emefiele’s tenure, the CBN earned a reputation for such activities, notably the Anchor Borrowers Programme, which disbursed about N629 billion to farmers in 2022. However, concerns arose as loan defaults threatened the program’s success.
Another significant quasi-fiscal activity was a N1 trillion loan facility for manufacturers introduced in April 2020, indicating a trend that the CBN, under new leadership, is now determined to reverse.
